ASIC found Saxo’s TMDs for derivative products to be inappropriate, particularly concerning retail clients who use CFDs as a significant part of their investment portfolio, clients with investment timeframes of up to one year or up to three years, and specific instruments sought by retail clients for growth and income.
CFDs, or derivative contracts with leverage, allow traders to speculate the value of assets. ASIC imposed trading regulations because these financial instruments were widely regarded as high-risk.
The introduction of design and distribution obligations (DDO) by ASIC in October 2021 requires product issuers and distributors to prioritize consumers’ interests. Under the DDO, financial product issuers are required to “clearly define target markets for their products appropriately, having regard to the risks and features of their products.”
ASIC issued interim orders for retail clients to prevent them from buying CFDs at Saxo that are not suitable for their financial needs, objectives or situations. The orders did not prevent Saxo’s existing clients from varying or closing their CFD positions.